The case for Open Innovation in mining

The benefits of increased openness in respect of co-operating with external entities on matters of research and development have been discussed for over half a century. And, about 20 years ago, a definition of open innovation emerged as “a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology”. Today, the term “open innovation” is used to describe an information age mindset toward innovation that obviates the secrecy and silo mentality of traditional corporate research labs. Folks: open innovation is not, in itself, a brand-new idea.

Despite the maturity of the open innovation concept, it’s generally regarded more as the exception than the norm where mining is concerned. In recognition of this, The Case for Open Innovation in Mining: the disruptor needed for digital acceleration in the mining sector was the subject of a presentation recently last week at the Investing in African Mining Indaba, given by Elaine Hattingh, innovation champion for Exxaro Resources, and Sandiso Sibisi, founder and director for COOi Studios. Elaine and Sandiso have kindly given us at Axora a view of what they’ve presented, based on their experiences in South Africa.

In 2018-19, South Africa’s Research, Development and Innovation (RDI) expenditure declined for the first time since 2009/10. Gross domestic expenditure on R&D fell by 5% from the R38.725bn (USD2.43bn) recorded in 2017-18 to R36,784bn (USD2.31bn) in 2018-19.

“This decline has happened,” explains Exxaro Resources’ Elaine Hattingh, “because executives are having difficulty aligning their innovation strategy with their business strategy – with the consequence that it has become difficult to reap the expected, full benefits of innovation efforts. But in a ‘business strategy vs innovation strategy’ tug of war, there’s no winner: what happens is innovation costs simply rise. This is because corporates often work in silos, which makes it hard for them to come up with truly radical, truly innovative solutions that have far-reaching effects across the business.”

As an organisation learns to collaborate better, there will be increased cross-pollination of ideas between it and the solution provider. New ways of working will inevitably emerge from this process, resulting in a positive cultural shift for both parties. Elaine’s innovation-related responsibilities at Exxaro include ensuring that such a situation doesn’t occur. Part of her strategy for success has been to develop a culture of true open innovation, which she describes as ‘a process of fostering and managing flows of innovation knowledge across organisational boundaries, as well as expanding the markets for external use of innovation’. “It’s far more involved than simply encouraging innovation collaboration with people and organisations outside the company,” she says.

The strategy has been a considerable success, to the extent that Elaine identifies and measures four distinct types of benefit that have accrued from Exxaro’s wholehearted adoption of open innovation: time, cost, culture and business improvement.

Shortened implementation time is an obvious example of a time benefit; third party solutions have typically already been built and thoroughly tested in parallel industries. In a similar vein, costs are typically lower for the implementing organisation, because it does not need to resource the ‘research’ component of the R&D process.

Cultural and business improvement benefits are likely to be more profound – but are, by their nature, likely to take time to accrue, says Elaine. “As an organisation learns to collaborate better, there will be increased cross-pollination of ideas between it and the solution provider. New ways of working will inevitably emerge from this process, resulting in a positive cultural shift for both parties. Meanwhile, the implementation of open innovation by a company requires – pretty much by definition – a revision to outdated processes, so the organisation itself is forced to adapt to more positive, newer ways of working,” she says.

After 1.5 years as Manager: Innovation Planning and Execution for Exxaro, Elaine offers four key learnings to any organisation engaged in a similar transformation. “First, we have to be open-minded and acknowledge that other industries can bring real value to mining; we have to be open to cross-industry collaboration. We all say we are, and largely we are – but we can all be more open,” she says. “But, second, we also need to be focused: innovation must be purpose-driven and value-adding. Innovation for innovation’s sake mustn’t become a distraction.”

“These next two points are critical if open innovation is going either to succeed on even a single project scale, or to bring enduring, real benefits to your organisation. First: stakeholder buy-in – from every stakeholder – is vital to successful implementation; ‘friction’ caused by stakeholders who haven’t bought-in can really diminish or even eliminate the value of the planned innovation.”

“Second, innovation needs to become culturally embedded into your organisation. Mining is one of the oldest human industries and has been responsible for some spectacular innovations. But, equally, mining is such a fundamental, primal activity that it can also be prone to a “that’s the way we’ve always done it” mindset. Mining is of huge importance if we’re going to shift to a greener future, we’re going to need to give new thinking space to flourish – because the next spectacular innovation might well come from mining adopting a truly open innovation approach,” she says.

Exxaro’s Elaine Hattingh and COOi Studios’ Sandiso Sibisi co-presented on Open Innovation on the Mining 2050 stage at INDABA, South Africa, on Wednesday May 11th 2022. They examined several case studies of how open innovation has benefited mining organisations, and provided an experience-based blueprint for the successful implementation of open innovation in your organisation.

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